Discount = Gain

CBS.MarketWatch.com

Why would anybody invest in Eastern Europe? Fractured economies, a war in Yugoslavia ... all scary stuff. But in the quirky world of closed-end funds, said funds frequently trade at a discount to the actual net asset value when they invest in markets or sectors that are out of favor.

Such is the case with AIM Eastern Europe Fund
GTF
While shares in the fund traded around 7 3/8 on Friday, its actual net asset value, however, was $8.18 -- a discount of nearly 9 percent. It was discount of 21 percent, however, a day earlier. That was before AIM Advisors Inc. announced that it will merge the $48 million closed-end portfolio into the open-end AIM Developing Markets Fund (GTDDX). Once incorporated into the other fund, shares will trade at their actual value and shareholders immediately benefit from the discount.

"The acquisition will allow the shares of AIM Eastern Europe Fund, which have been trading at a discount, to reflect true portfolio value," said AIM president and CEO Robert H. Graham.

Once the merger officially takes place, Eastern Europe shareholders will exchange their shares at net asset value for Class A shares of Developing Markets. The new Developing Markets share holders will have the option of staying invested in the fund, exchange shares among other AIM funds or redeeming their shares. The front-end sales charge of 4.75 percent will not be charged as a result of the transaction but there is a redemption fee of 2 percent on shares traded during the first 12 months. The Developing Markets fund instituted the redemption fee as a means of keeping assets stable, the firm said.

While AIM hasn't specified a specific date for the merger to take place, they did confirm that it should take place some time in the third quarter.

While closed-end Eastern Europe invests in a broad range of European securities, the $198 million Developing Markets fund takes a more global approach, seeking long-term capital appreciation in the emerging markets of Europe, Asia, Latin America and elsewhere. The broader focus has served the fund well so far this year, up 30 percent year to date. The total expense ratio for Developing Markets is a bit high at 1.73 percent, which includes a 12b-1 fee of 0.5 percent. Turnover is very high at 111 percent. AIM is a subsidiary of independent global investment managerAMVESCAP PLC
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Ripe for Asia

Liberty Financial
L, -1.82%
unit Newport Fund Management officially launched the Newport Asia Pacific Fund. The fund, which had been in incubation since Aug. 20, now has assets of $4 million. Through Thursday, the fund is up nearly 62 percent, adjusted for load. The time is ripe, says co-manager Christopher Legallet, who has responsibility for other Asia Pacific regions excluding Japan. "With the valuation of U.S. stocks at all-time highs, many investors are seeking to diversify outside the country. At the same time, we've seen some signs of recovery in Asia and some investment flows into the region," said Legallet. Portfolio managers Legallet and David R. Smith, who manages the Japanese portion of the portfolio, start by identifying countries and industries where the prospects for growth are strong. They then look for companies with impressive records. The fund, available through financial planners, is being offered in A, B and C shares. Class A shares carry a front-end load of 5.75 percent.

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